Lebbey Sdn Bhd

- vs -

Tan

Judgment

Faiza Tamby Chik, J

INTRODUCTION

1. The appellant are developers. The respondents were the joint purchasers of a factory known as Lot 117 in a project developed by the appellant called Pandan Indah Industrial Park ("the said factory"). The purchase price of RM288,000 has been fully paid. The appellant delayed in the delivery of vacant possession of the said factory by 324 days. By this action, the respondents' claim against the appellant liquidated and ascertained damages (LAD) as expressly contracted for in the sale and purchase agreement dated September 14, 1993 (SPA) for such delay to the sum of RM30,677.92 plus interest and costs. The sale and purchase agreement was prepared by the appellants themselves.

   CHRONOLOGY OF EVENTS

2. A chronology of events pertaining to the action are as follows:

THE ISSUES

3. Briefly, the appellant had raised and relied on three issues in the further affidavits dated April 2, 1999 and April 28, 1999 namely:

   1. that Clause 16 of the sale and purchase agreement between the appellant and the respondents was to be interpreted in accordance with the law and more specifically with s 75 of the Contracts Act 1950 (see paragraph 5 on pp 63 and 64 of the AR).

   2. that the respondents had not suffered any loss and / or proved that they have incurred any loss due to the alleged breach of agreement (see paragraph 9 on p 64 of the AR).

   3. that the respondents had only paid the full purchase price of the said property to the appellants after 18 days of the delivery of vacant possession, therefore the appellants were not obliged to deliver vacant possession within 24 months (see paragraph 9 and 10 on pp 81 and 82 of the AR).

4. Section 75 of the Contracts Act 1950 states:

   When a contract has been broken, if a sum is named in the contract as the amount to be paid in the case of such breach, or if the contract contains any other stipulation by way of penalty the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.

5. Based on the literal interpretation of s 75 of the Contracts Act 1950 and Clause 16 of the sale and purchase agreement, the parties have agreed to liquidated damage if one party breaches the said agreement, whether or not actual damage or loss is proved to have been caused thereby, the complaining party will be entitled to reasonable damages not exceeding the amount agreed to by the parties as liquidated damages.

6. In Bumiputra Merchant Banker Bhd v The Melewar Corporation Bhd [1990] 2 CLJ 30 the court held:

   [5]

   In relation to the imposition of interest at 2% per annum over the prescribed rate of default as being contrary to ss 74 and 75 of the Contracts Act 1950; since this additional interest at 2% per annum was an agreed term which was incorporated into the loan agreement, the defendants cannot now raise any objection to the imposition of such a rate and therefore, ss 74 and 75 of the Contracts Act do not apply.

7. Therefore based on the interpretation of s 75 of the Contracts Act above, the appellants averments that the respondents have not suffered loss and or proved loss as a consequence of the said breach is irrelevant since, if the parties have agreed to liquidated damages then damages need not be proven. The appellant submitted that according to Order 26A r 4(1) of the Subordinate Courts Rules 1980 the appellant may not less than four clear days before the date of hearing show cause against an application (for summary judgement) by affidavit or otherwise to the satisfaction of the court and in this case the respondents' application for summary judgement ought to be dismissed as the respondents have failed to prove actual loss or damages consequent to the breach of contract.

8. It may be observed that the provisions / language and meaning of the s 75 of the Contracts Act 1950 is clear in that if parties have agreed to liquidated damages if one party breaches the said agreement, whether or not actual damage or loss is proved to have been caused thereby, the complaining party will be entitled to reasonable damages not exceeding the amount agreed by the parties as liquidated damages. Therefore the court should interpret this section by giving it a literal, plain and ordinary interpretation. A contrary interpretation would be against the express provisions of the section.

9. In Zainuddin Dato Seri Paduka Hj Marsal v Pengiran Patera Negara Pengiran Hj Umar Pengiran Dato Penghulu Pg Hj Apong [1997] 4 CLJ 233, the Court of Appeal Brunei Darussalam held:

   [1]

   In the interpretation of statutes, the task of the court is to consider the whole of the legislative provisions in their proper context to ascertain the intention of the legislature as expressed by the wording employed. In doing so, effect has to be given to the common law prima facie rule that existing rights are not impaired unless such a construction is unavoidable. The court will apply the presumption that where some retrospective operation is intended, the statute is not to be construed so as to give it a wider retrospective operation than the language used makes necessary.

   [2]

   If only one meaning can be given to the provisions under review, the court must disregard any apparent anomaly or seeming absurdity and construe the words used in their ordinary sense. But where this is not so, the court will seek to interpret the provisions in a way that does not result in absurdity.

10. I am of the opinion to limit the application of s 75 of the Contracts Act 1950 to cases where damages are difficult to assess is illogical and cannot be accepted for the following reasons:

    1. The illustrations provided by s 75 of the Contracts Act 1950 in particular illustration (a) clearly shows that liquidated damages is permissible even when the actual damages suffered by the complaining party can be easily proved. 

       (See illustration (a) of s 75 of the Contracts Act 1950).

       ILLUSTRATIONS
       (a)	A contracts with B to pay B $1,000, if he fails to pay B $500 on a given day. A fails to pay B $500 on that day, B is entitled to recover from A such compensation, not exceeding $1,000, as the court considers reasonable.

    2. If the application of s 75 of the Contracts Act 1950 is limited to cases where damages are difficult to assess then parties need not agree and enter into terms that provide for liquidated damages as they will not be bound with such a clause. On the contrary, the respondents submit that the purpose of s 75 of the Contracts Act 1950 is to allow parties to enter into contracts that provide for liquidated damages so long as such terms are reasonable.

    3. The appellant's construction of s 75 of the Contracts Act 1950 cannot be accepted as it offends the principle that "parties are bound by their agreement".

11. In Perdana Finance Bhd v Azmi Ahmad [1997] 2 CLJ 325 at 326 the court held:

    [3]

    A court may distinguish an earlier decision when it finds that the case before it does not fall within the ratio decidendi of the earlier decision because of some material difference of fact. This apart, it can also distinguish an earlier decision by cutting down the ratio decidendi of that earlier decision. By the latter method the Court cuts down the ratio decidendi of the earlier case by treating as material to the earlier decision some fact, present in the earlier case which the earlier court regarded as immaterial, or by introducing a qualification or an exception into the rule stated by the earlier court.

12. The facts in this case differ from Selva Kumar Murugiah v Thigarajah Retnasamy [1995] 2 AMR 1097, in that in Selva Kumar the clause pertaining to liquidated damages was unreasonable. In that case the said clause stated that in the event the purchaser defaults all monies paid by the purchaser may be forfeited by the vendor. The purchaser had paid 80% of the purchase price to the vendor and subsequently defaulted. The vendor sought to forfeit all the monies paid by the purchaser. Therefore, surely the court in that case was minded to find that s 75 of the Contracts Act 1950 would not apply in the strict sense in that instance. However in this case, the agreed liquidated damages is 12% of the purchase price. It is submitted that this is reasonable in view of the fact that the appellant himself charges the respondents 12% of the purchase price per annum on payments due. (see Clause 3 of the sale and purchase agreement, p 21 of the appeal record).

13. Further the respondents state that the terms of the sale and purchase agreement were drawn up by the appellants themselves. The appellants have also admitted that the parties (see paragraph 8 on p 87 of the AR) agreed upon the said terms, therefore the appellants are bound and estopped from breaching the agreement.

14. In Boustead Trading (1985) Sdn Bhd v Arab Malaysian Merchant Bank Bhd [1995] 3 AMR 2871 the Federal Court held:

    (2)	The doctrine of estoppel is a flexible principle by which justice is done according to the circumstances. It is a doctrine of wide utility and has been resorted to in varying fact patterns to achieve justice. The maxim 'estoppel may be used as a shield but not a sword does not limit the doctrine of estoppel to defendants alone. Plaintiffs too may have recourse to it. Estoppel may assist a plaintiff in enforcing a cause of action by preventing a defendant from denying the existence of some fact which would destroy the cause of action.
    ....
    (5)	Even though estoppel was not pleaded as required under Order 18 rr 7(1) and 8(1) of the Rules of the High Court 1980, the material facts giving rise to the estoppel were sufficiently pleaded without actually using the term 'estopped'. Furthermore, considerable evidence on the point was led at the trial by the respondent without objection from the appellant.
    (6)	A court may permit a litigant to argue an unpleaded estoppel if it is in the interest of justice to do so. It is a matter within the discretion of the judge who must have due regard to all the circumstances of the case, including any prejudice that may be caused by the affected party being taken by surprise. Nevertheless, such departures should rarely be permitted, for otherwise, the rule that a party is bound by its pleadings will be rendered meaningless.

15. In Sia Siew Hong v Lim Gim Chian [1996] 3 AMR 3651 the Court of Appeal stated obiter dictum:

    Under the doctrine of estoppel, it would be unjust and inequitable to permit the appellants to raise the defence of limitation as the appellants had agreed that the respondents could enforce the guarantee at any time'. In regard to written law, the maxim can also be stated as 'equity will not permit statute to be used as an engine of fraud' to prelude the appellants who were guilty of unconscionable conduct from relying upon the Limitation Act 1953.

16. Therefore, I am of the view that because the terms of the sale and purchase agreement were drawn up by the appellants themselves, they cannot rely on s 75 of the Contracts Act 1950 to avoid paying the agreed "liquidated damages".

17. It is observed that the respondent's contention

    that the respondents had only paid the full purchase price of the said property to the appellants after 18 days of the delivery of vacant possession, therefore the appellants are not obliged to deliver vacant possession within 24 months,

    I am of the view that the appellants are estopped from relying on this averment based on the following:

    1. The appellants voluntarily gave vacant possession to the respondents to facilitate the appellants to obtain a loan from Perwira Affin Bank;

    2. The letter dated April 19,1999 from the appellant to the respondents (see pp 51-53 of the AR) states that the respondents will be deemed to have taken vacant possession seven days from the date of the said notice. Therefore the appellants are also bound by the effect of the said notice;

    3. The letter dated May 7,1999 from the appellants to the respondents (see p 55 of the AR) states that the respondents have complied and fulfilled all the terms and obligations. Therefore the appellants are estopped from alleging that the respondents have taken vacant possession without fulfilling their obligations because this would seem that the appellant is now contradicting the express contends of their letter. Therefore the appellant should not be allowed to make allegation to their whims and fancies.

    4. In addition to the above I see that the respondents have also been charged interest for late payment, as shown in the statement of accounts (in the enclosure of the letter dated April 19, 1996) marked as Exh "L-2" in the respondents affidavit of March 2, 1998 (which the appellant has not included in their record of appeal). This is the mode of payment agreed by the appellant and Perwira Affin Bank. The effect of the agreement is that the appellant has impliedly granted the respondents an extension of time to settle the balance price. Therefore the appellant is estopped from relying on the issue of late payment and to breach their obligation.

18. In Paramount Corporation v Mulpha Pacific Sdn Bhd [1999] 5 CLJ 539 @ pp 540 and 541, the court held:

    [8]	In fact and in law, the accrued agreed interest is not a penalty but is actually consideration for the plaintiff having so granted the additional time to the defendant.

    Obiter-

    [1]

    When an agreement has been reduced into writing, the parties are bound by the terms and conditions of the written document. They are bound by the four comers of the written document. The words and expressions used in a written document such as the SAP agreement should be given their literal and natural interpretation.

19. It is to be noted that the appellant itself charges interest at the rate of 12% per annum on any unpaid sums (refer to Clause 3 of the sale and purchase agreement at p 21 of the AR). It does not now lie in the mouth of the appellant now to complain that damages on late delivery of the factory should not be at 12% per annum of the purchase price. In fact, if the appellant's argument were to be accepted, the appellant would have given the impression to members of the public that it shall pay 12% per annum on the purchase price for every day of delay.

20. Therefore based on the above, the respondents believe that the appellant does not have a defence in this action and the facts of this case are undisputed and clear in that there is a valid sale and purchase agreement between the respondents and the appellant and that, inter alia it is a term of the agreement that the parties have agreed to liquidated damages in the event of a breach. Hence it is only reasonable and justifiable that summary judgment ought to be granted in favour of the respondents based on the said agreement.

21. In Malayan Insurance (M) Sdn Bhd v Asia Hotel Sdn Bhd [1986] 2 MLJ 183, the Supreme Court held:

    (2)

    Where the issue raised is solely a question of law pure and simple without reference to any facts or where the facts are clear and undisputed the court should exercise its duty under Order 13 as in any other cases and decide on the question of law. This is so even if the issue of law raised is a difficult one. If the court after considering the argument is satisfied that it is really unarguable then the court should grant summary judgment.

22. In the premise, I find that the appellant's appeal is not only inherently flawed but is totally devoid of merits and I therefore dismiss it with costs.

Cases

Selva Kumar Murugiah v Thigarajah Retnasamy [1995] 2 AMR 1097; Boustead Trading (1985) Sdn Bhd v Arab Malaysian Merchant Bank Bhd [1995] 3 AMR 2871; Bumiputra Merchant Banker Bhd v The Melewar Corporation Bhd [1990] 2 CLJ 30; Malayan Insurance (M) Sdn Bhd v Asia Hotel Sdn Bhd [1986] 2 MLJ 183; Paramount Corporation v Mulpha Pacific Sdn Bhd [1999] 5 CLJ 539; Perdana Finance Bhd v Azmi Ahmad [1997] 2 CLJ 325; Sia Siew Hong v Lim Gim Chian [1996] 3 AMR 3651; Zainuddin Dato Seri Paduka Hj Marsal v Pengiran Patera Negara Pengiran Hj Umar Pengiran Dato Penghulu Pg Hj Apong [1997] 4 CLJ 233

Legislations

Subordinate Courts Rules 1980: Ord.26A r 4(1)

Contracts Act 1950: s.75

Representation

CJ Tam (Rajinder Singh Veriah & Co) for Appellant

Linda Lopez (De Costa & Co) for Respondents

Notes:-

This case is also reported at [2000] 1 AMR